Gold Nears 1-Year Price High As Funds Buy Posted by James Randolph on October 01, 2012
October 1, 2012 – Gold pushed higher, close to a one-year high on Monday with both traders and
analysts citing fund buying and central bank demand as main drivers, while markets
opened the new quarter in a weak dollar environment.
The dollar dropped from its three-week high, measured against a basket of major
currencies, as a gain in U.S. manufacturing activity brought a risk-on stance to markets.
The spot price of bullion breached the $1,790 per troy ounce level seen last in
Dealers said a flood of fund-related buying was a main impetus in the nearly
4.0 million ounces of gold traded in the U.S. futures market in a matter of moments,
according to Reuters.
There is also a suspicion among traders and analysts that central banks are in
the markets, prompted by the soft long-term outlook for the dollar after the stimulus
measures proposed to bolster the U.S. economy.
Adrian Day of Adrian Day Asset Management, based in Annapolis, Maryland,
said she wouldn’t be surprised at all to learn that central banks have been buying gold
over the last couple weeks, a revelation that would only come after the dust settles.
She added that central banks typically do not say upfront if they’re buying gold,
but she notes they were in the market during the summer, which was discovered after the
fact, and they may be maintaining that momentum now. Day’s firm manages about $200
million in commodities with about a third of that allocated to gold holdings.
According to the World Gold Council’s August report, demand for bullion
dropped about 10 percent in the second quarter against the first, but the drop was offset
by a pick-up in central bank buying.
Bullion traded below $1,530 per troy ounce to just above $1,680 per troy ounce
in the second quarter as the spot price dropped 4 percent from the previous quarter. In the
third quarter, however, gold bullion traded above $1,787 per troy ounce, a gain of nearly
During Monday’s trading session, gold bullion hit $1,791.20 per troy ounce, the
highest prices seen in the market since November 14th of 2011, when the price breached
U.S. gold futures contracts for December delivery, the most actively traded
contracts, gained above $1,794, the highest levels since February 29 when prices crossed
the psychologically important $1,800 per troy ounce level.